1. Rojas Breu: Banque de France, Paris, France. Phone 33 1 42 92 65 92, Fax 33 1 42 92 62 92, E-mail
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    • I would like to specially thank Aleksander Berentsen and two anonymous referees. I also thank Vincent Bignon, Régis Breton, Jean Cartelier, Miquel Faig, Cyril Monnet, Casper de Vries, Christopher Waller, Makoto Watanabe, Warren Weber, Pierre-Olivier Weill, and Randall Wright for very helpful discussions and suggestions, as well as participants at the Symposium on Money and Banking (Rennes), Money, Macro and Finance Conference (Birmingham), Chicago Fed Workshop on Money, Banking and Payments, AFSE Conference (Paris), T2M Conference (Cergy), and seminars at University of Basel and University of Paris X. This article was finished while I was visiting the Federal Reserve Bank of St. Louis. I acknowledge financial support from the Swiss National Science Foundation and Région Ile de France. The views expressed in this article are mine and should not be interpreted as reflecting those of the Banque de France. Any errors are my own.


I present a model in which credit and outside money can be used as means of payment in order to analyze how access to credit affects welfare when credit markets feature limited participation. Allowing more agents to use credit has an ambiguous effect on welfare because it may make consumption-risk sharing more inefficient. I calibrate the model using U.S. data on credit-card use and show that the increase in access to credit from 1990 to the near present has had a slightly negative impact on welfare. (JEL E51, E41)